The future?

Beset by disappointing results and uncertainty, investment in media has stalled. But there are still successful sectors worth investors’ time.

 ‘Media’ is a very broad church; it contains everything from storied newspapers and broadcasters to borderline tech companies with a publishing arm. Each vertical has its own set of challenges, with older forms of media grappling with diminishing revenue models and newer forms effectively struggling to justify investment when earnings do not live up to expectations.

So to say that ‘media’ is underperforming when it comes to receiving investment is accurate – with an overall fall in price-to-earnings ratio (P/E) – but it does not tell the entire story. There are any number of verticals within media that are either quietly outperforming or on the cusp of rejuvenation.

Additionally, even some of the media sectors that are seen to be ‘struggling’ have green shoots of growth that should give investors pause.

So where is investment ongoing – and where is there the greatest opportunity for investors to contribute to the media’s ongoing transformation?

The AI question

Let’s get it out of the way. Artificial intelligence is the investor darling du jour. OpenAI and other AI tech providers receive a significant amount of attention and investment, given how transformative it promises to be across a number of other industries. Data from Crunchbase demonstrates that AI companies have received a significant amount of seed funding over the past few months, as hunger for that tech grows.

That has led to a secondary effect, where media companies that sign licensing deals with those AI companies are seen to be equally forward-facing. It is particularly beneficial to those legacy media companies with huge archives like Time, who can command good terms with the AI companies they partner with.

These licensing deals alone are unlikely to be a silver bullet for media companies. There are too many uncertainties around the future relationship between AI and media companies (as seen by the Australian government not even having a position on the value exchange between the two yet) to even say how transformative it will be in the mid- to long-term future. What it unquestionably does do, however, is demonstrate there are still opportunities for legacy media to find digital revenue sources (or to have them brought to their doorsteps in this case).

B2B media is also poised for significant AI-based transformation. While the sentiment is that B2B companies have been relatively slow to adapt to an AI-centric world, that is rapidly changing. According to Collingwood Advisory, 35% of subscriptions businesses slightly have implemented an AI policy, with a further 35% working on one.

Local social news

Despite the acrimonious relationship between social media platforms and news publications, there is still investment taking place in the intersection between the two.

Nextdoor – the neighbourhood-based social network – has previously stated its ambitions to become a major news source for its users. It secured a post-IPO injection of cash at the start of 2023 based in part on its use as a hyperlocal news source during the pandemic. Similarly, Berlin-based Lost In – a “city guide curated by locals” – received $4m in seed funding earlier this month, suggesting that investors see a future in more local and curated content.

That tallies nicely with the growth of subscription- and donation-based local news sources. In the UK, Mill Media is probably the best example of this: its founder Joshi Hermann has spoken repeatedly about the need for local news to accurately reflect the community it serves, as has the founder of the Daily Memphian Andy Cates.

As a result, the local news industry is – despite the doldrums in which its more established members find themselves – still receiving funding. That is, of course, boosted by a growing recognition of the issue of news deserts: in the UK, the QT (a news source dedicated to the North-East specifically) received angel funding back in February.

Esports opportunities

Esports has continued its audience growth over the past years, with more events, training facilities, and dedicated platforms than ever before. At the same time, given the scale of the opportunity for ecommerce and audience engagement, this space still has a lot of room for investment for companies with an eye on future reimbursement.

Gfinity, for example, is both an events and publishing company based around esport tournaments. Despite what it describes as a “multi-year downturn” based on issues around control of gaming IP and rights to tournaments, it has continued boosting its journalistic coverage of the space: “In terms of traffic/audience, by launching new sites and collaborating with national publishers on gaming content; and, in terms of sales, by taking more control in-house – both commercially and technically – of our advertising and sponsorship sales, we are now well placed to drive improved yields, and volumes.”

Importantly, esports is not solely a US/Europe focused phenomenon. India-based companies are springing up to serve that country’s esports fanatics: Calcutta-based TalkEsports received angel funding in May this year, with Clout Scoop and Esports Daily India also receiving funding over the past two years.

The old favourites

Beyond esports, the old guard of physical sports are still a reliable source of subscription and advertising revenue for media companies. Given the scale of its audience it is small wonder that the NYT snapped up The Athletic in 2022, and it is well known that cable bundles are underpinned in no small part by their exclusive sports broadcast rights.

However, just as local news is seeing a resurgence in investment based on both commercial and social considerations, so too are sport-specific media organisations. B2C US-based Basketball Forever received $4m in Series A funding back in March, while B2B sports information site Front Office Sports announced it had also received funding in October of last year.

Additionally, the humble newsletter has been a perennial feature of the media landscape for almost as long as the internet has existed. But, with the burgeoning recognition that audiences still have a hunger for newsletters and investment from platforms like LinkedIn in their own newsletter capabilities, dedicated newsletter platforms have continued to grow in prominence. Many of the above opportunities – local news and sports in particular – are underpinned in part by the use of newsletters.

Substack – potentially the biggest player in the market – received equity crowdfunding of almost $8m in May 2023. That said, it won’t be hard for investors looking for other newsletter providers in which to invest to find them; new ones spring up all the time in response to that hunger.

So despite the well-known issues facing the media industry more widely, there remain opportunities for investment. Media companies looking to receive that funding need to be seen to be embracing new opportunities – in AI, news provision etc. – rather than simply cutting back.

Unfortunately for those of us still looking longingly at our Oculus headsets however, that future-facing outlook is not helping VR, AR and metaverse startups. According to Crunchbase data around $464 million this year has been invested in seed funding through to growth-phase funding for companies in those areas – tracking for the lowest funding total in years. True social VR looks to be a while away yet…

Chris Sutcliffe

Tech and Media Reporter and Co-Founder of Media Voices 

[email protected]

Martin Tripp Associates is a specialist executive search consultancy. We work globally across the media, information, technology, video games and entertainment sectors, and with some of the world’s biggest brands on communications, digital, marketing and technology roles. Feel free to contact us to discuss.